iQIYI (IQ) Q2 2025 Earnings Call Transcript

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DATE

Wednesday, August 20, 2025 at 7 a.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Lu Gong

Chief Financial Officer — Jun Wang

Chief Content Officer — Xiaobui Wang

Operator

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TAKEAWAYS

Total Revenue-- RMB6.6 billion reported in the second quarter; detailed segment breakdowns provided below.

Membership Services Revenue-- RMB4.1 billion, representing a 9% decrease year-over-year primarily due to a "lighter content slate" compared to the same period in 2024.

Online Advertising Revenue-- The Shadow's Edge recently surpassed RMB300 million at the box office, decreased by 13% year-over-year as several advertisers revised promotion strategies amid "macro pressures."

Accounts and Distribution Revenue-- RMB436.6 million, down 37% year-over-year primarily attributed to reduced other transactions.

Other Revenues-- RMB829.3 million, increased by 6% year-over-year

Content Cost-- RMB3.8 billion in content costs, reflecting an 8% year-over-year reduction linked to a lighter content slate

Total Operating Expenses-- RMB1.4 billion in total operating expenses, decreasing by 3% year-over-year

Non-GAAP Operating Income-- Non-GAAP operating income was RMB58.7 million, with a non-GAAP operating income margin of 1%.

Cash Holdings-- RMB5.1 billion in cash, cash equivalents, restricted cash, short-term investments, and long-term restricted cash.

Debt Repurchase-- US$85 million principal of 2028 notes repurchased for cash, reducing the outstanding balance to $208 million.

Net Interest Expense-- decreased by 33% year-over-year

Experience Business GMV-- Over RMB100 million in GMV from self-operated live table trading cards in the first half of the year, with notable IP-related records mentioned.

Overseas Membership Revenue Growth-- membership revenue grew by around 35% year-over-year, highlighted by more than 80% annual increases in markets such as Brazil, Mexico, Indonesia, and five Spanish-speaking regions.

Micro Drama Engagement-- Double-digit sequential growth in both gross average daily viewing time and unique visitors, with an expanded library of approximately 15,000 titles noted.

AI-Driven Features-- Introduction of the "AI-powered iJump Talkout" for mobile, covering over 2,300 titles and cited as quickly boosting user engagement.

SUMMARY

This call outlines explicit year-over-year declines in both membership services and online advertising revenues but highlights an offsetting increase in other revenue sources. Management pointed to continued cost savings, with reductions in both content costs and operating expenses. Overseas operations demonstrated substantial membership revenue expansion, especially in targeted emerging markets. Debt reduction efforts continued, with significant principal note repurchases and a 33% drop in net interest expense. Strategic growth initiatives were presented across IP merchandising, asset-light offline experiences, micro-drama expansion, and AI-led content delivery innovations.

Chief Content Officer Wang said, "after the release of these new policies, it is sending a strong signal, and that signal can attract more talent and capital into the content production, driving the healthy and vigorous development of the entire industry."

Management confirmed that "over 50 immersive shelters are already operating in around 30 cities nationwide" as part of its offline experience business roll-out.

CFO Jun Wang said, "Currently, the company has sufficient cash to meet the debt obligation if the CP holders decide to provide it to us." directly noting the firm's healthy liquidity position relative to debt maturities.

INDUSTRY GLOSSARY

Immersive Shelter: Physical, themed entertainment spaces operated in partnership under an asset-light model, leveraging proprietary IP for consumer engagement.

AI-powered iJump Talkout: Interactive video feature enabling mobile app users to jump between key scenes in dramas or variety shows using AI-driven episode curation.

Micro Drama: Short-form scripted video series designed for quick viewing, increasingly used to attract diverse and younger audiences domestically and internationally.

IP Merchandising: Commercialization of intellectual property via products—such as trading cards—integrated with content or sold through online/offline channels.

Drama Shelter: Themed content hubs on iQIYI’s platform grouping dramas by genre or narrative structure to curate and promote viewership.

Full Conference Call Transcript

Lu Gong: Hello, everyone, and thank you for joining us today. Throughout the second quarter and the summer season, we delivered a diverse lineup of content, the current leadership in total drama viewership market share according to Enlightened. Our robust offerings were highlighted by three original blockbuster dramas that generated IG popularity index scores of over 10,000, namely Field, Bingjianxian, Coroner's Theory, Caoxilu, and the Thriving Land, Shiwanwu. Among them, Field and the Coroner's Diary resonated especially well with female viewers, while the Thriving Land captured the hearts of audiences of all ages and genders. These blockbusters further solidified our dominance in both the female and realistic genres. The performance of our variety shows was equally impressive.

In the summer season, iQIYI accounted for four of the top five spots in our Enlightened total viewership list. The highly anticipated return of our flagship IP, The King of Stand Up Comedy Season two, and the season and the wrap of China 2025, Xinhua Chang, generated impressive viewership with The King of Stand Up Comedy Season two commanding the industry's highest viewership market share in its category in the summer. The strong performance of our premium content drove our key operating metrics in the summer, reflecting our commitment to delivering high-quality, diverse stories while continuing the user experience across our platform.

Building on the strong momentum of our content ecosystem, we are proactively exploring new opportunities to foster sustainable long-term value creation and achieve meaningful progress in our experience business and overseas business. Let me begin with our experience business. We are focusing on two key areas: IP-based consumer products and offline experiences. We are leveraging our extensive and unique IP collection to enhance our competitive edge and tap into the booming IP merchandising market. In the first half of the year, our self-operated live table trading cards achieved over RMB100 million in GMV with popular IPs such as lobbying prevailing, Huai Ruuding field setting new sales records.

We will also bring our IPs to offline experiences like IT land and immersive centers following an asset-light strategy. Currently, two IT labs in Yongzhou and Kaibong are in development, while over 50 immersive shelters are already operating in around 30 cities nationwide. Our business outside Mainland China continues to show strong growth momentum. In the second quarter, both subscriber base and revenue from the membership services reached record highs. We have now established four major operating regions: Southeast Asia, North America, Japan and Korea, and The Middle East and North Africa. We have meaningfully enhanced our brand influence and expanded our global recognition by combining premium C-pop content with targeted localized operations, unlocking exciting opportunities for further growth.

Now let's dive into the details of our business performance in Q2, starting with content, which serves as a foundation of our business. We maintained our leadership of the core long-form drama category, securing the top spot in total viewership market share for four consecutive quarters according to Enlightened data. Our performance in the second quarter was driven by our diverse content offering highlighted by an enhanced lineup of female-oriented dramas. Notably, Field achieved an IT popularity index score of over 10,000, topping the Enlightened list. Our original series Demon Hunter's Romance, Wiltu, is an in-house production that achieved a peak IGA popularity index score of over 9,800 thanks to its perfect blend of traditional Chinese tales and arts.

Other standout titles include Dream with a Dream, Wishing a Dream, Shuju and Yemeng, and the lobbying pavilion from our Roma theme heartbeat shelter, Ganjingqiu Chang, which scored over 9,600 and 8,900 for popularity index respectively. We also broadened our appeal with multiple suspense and realistic scenarios including The Secret Path, Jamie Zhao Leong, and two dramas from our suspense shelter, Breaking the Shadow, and Life for Life. The Secret Path and Breaking the Shadow were especially well received by large screen viewers, ranking among the top five most-watched titles on TVs. Our premium content has won high recognition from the industry.

In the latest Magnolia Award, one of the most prestigious honors of Chinese dramas, 13 titles produced by or broadcasted on iQIYI received an impressive total of 29 nominations with four titles winning a combined eight awards. Notably, our original drama To the Wonder With Other Time from our microcosm shelter, Mission Yucha, received the highest honor, the Best TV Series Award, along with the International Communication Award and Best Cinematography Award. Additionally, City of the City, Chengdu Cheong, won the special award and We Are Criminal Police, Xinjiang, received both the Grand Prix and the Best Original Screenplay Award. Moving on to micro dramas, a valuable complement to our content ecosystem.

More people are tuning into iQIYI to watch micro dramas. In the second quarter, gross average daily viewing time and unique visitors have shown double-digit sequential growth. Our library boasts a diverse collection of about 15,000 titles forming a strong portfolio of micro dramas. Since the second quarter, we have shifted our strategy focus on consistently delivering premium micro dramas through original production and licensing, aiming to drive user growth and accelerate revenue expansion. Our internal data indicates that premium micro dramas can consistently outperform across key metrics, including subscriber conversion, viewing time, user engagement, and retention. Developing premium content is our core strength.

Built upon years of experience in producing long-term video blockbusters, our expertise in content production and advanced technology can be seen as applied to premium micro dramas. Additionally, our extensive IP collection provides us with a unique resource for success in IP adaptation. In Q2, we made great strides with original micro dramas and launched multiple titles that performed exceptionally well with audiences, including In Is Capable, A Scrouching Love, How Dare You, Chong Le Kitong, and For My Dearest Xiaocheng Zhu.

Notably, How Dare You, our first IP-adapted micro drama, hit a new milestone by reaching a peak iQIYI popularity index score of 5,500, a historical high for our platform, and even outperformed the licensed hit My Sweet Home in both average daily unique visitors and revenue from new subscriptions in the first week of release. Its success extended beyond numbers, broadening the typical micro drama audience and attracting a younger and more diverse demographic. It's a great example of how we are successfully developing IP across multiple formats. The strong reception of this micro drama drove reservations for the long-form generation and the second season of the animation based on the same IP.

It also increased rewatch of the animation's first season, showing the power of strategic IP development to drive engagement across formats. Turning to movies, we have dominated this category in viewership market share for fourteen consecutive quarters according to Enlightened data. In the second quarter, we launched over 10 major titles catering to a diverse range of audiences with a variety of genres, including crime, female realistic, martial arts, comedy, and action. Standout titles included the licensed movie Detective Chinatown 1900 and the original movie The Only Way in Chinese New. We have been actively innovating our movie business model to drive long-term industry growth.

This quarter, we were the first in the industry to use the revenue-sharing model typically seen with online films for newly released theatrical movies. This approach includes revenue potential for titles with limited box office performance. A great example is our pilot project Trapped Daften Shop, which generated over RMB28 million in revenue-sharing income on our platform, the highest for any movie title this year. Remarkably, this amount even surpassed its box office revenue share, showcasing the potential of this model to amplify returns. For variety shows, our focus on delivering top titles has yielded great results.

According to Enlightened data, iQIYI released five S-plus rated variety shows in the first half of the year, the highest among all long-form video platforms, with four of them being original productions. Our flagship IP, Five Plus Season five, made a strong comeback with a record-high IT popularity score, surpassing member revenue expansion and its current status as a nationally renowned IP. Additionally, the competition formats in the latest season of the wrap of China 2025 strongly connected with the audience, driving the popularity index score to over 9,500 and setting a new record for the show. For animations, we continue to improve our original production capabilities.

Revenue from Over the Divide Reals, Shenguochesha, has consistently ranked as our top-performing Chinese animation during the same period on our platform. Moving on to our content strategy and pipeline. For long-form dramas, we focus on crafting top-notch premium stories that balance high commercial value with innovation and artistic excellence. At the same time, we are committed to delivering a steady, diverse slate of content that resonates with our broad audience to elevate engagement. We are also reducing episode counts for a tighter, more compelling viewer experience. For the summer season, we introduced female-oriented key titles such as Corona's Diary and The Wanted Detective Improvoke.

Among them, Corona's Story stood out as another in-house produced original that delivered exceptional performance, surpassing the IT Popularity Index score of 10,000. Its attractive growth generated a strong word-of-mouth buzz, further cementing its success. In addition, we also prepared a variety of new titles and our drama shelter brands, notably the Thriving Land, a realistic theme drama from our masterpiece shelter, Zaja Quchang, which exceeded our IGA popularity index score of 10,000 within just four days of its release, driven by its compelling storyline that resonated with a broad audience. Its popularity also extended beyond our platform, topping both the industry's Enlightened data and traditional TV station charts.

Other highlights from our suspense filter include Justifiable Defense and That App Shuyunbigu. In our upcoming fourth quarter, we are excited about our lineup of anticipated titles, including 8,000 Miles of Clouds and More, Legend of the Magnet, Born with Luck, Fox's Spirits, Matchmaker, Swallow and Beloved, A Strange Tale of Tang Dynasty, and Speed and Last Runway. For micro dramas, we are focused on premium titles. We released two to three premium titles each week during the summer season, including Sorbet of the Ruoxigua, Moment of Romance, The Wars, Revenge, Story of Zhao Yue, Zhao Yue Fei, and others. Shifting to movies, we are aiming to build a vibrant ecosystem for original production with three key projects.

First, our blockbuster project, where we team up with top filmmakers to deliver standout theatrical hits. Second, the Sleeper Hit Projects for Tianjinhua, where we partnered with rising directors to create bold, so article films that blend commercial appeal with fresh ideas. And third, the emerging film projects, is an innovative collaborative approach for original online movies and a minimum guarantee and a revenue-sharing model designed to spark creativity. Looking ahead, our original production pipeline features several titles for theatrical release, including crime, action movie, The Shadow's Edge, action comedy, Enough is Enough Get Now Measure, The Shadow's Edge and Buffon Zhui, and The Skin Pinot.

Notably, The Shadow's Edge, Buffon Zhui recently premiered in shelters, achieving an impressive initial box office of over RMB300 million within just five days. For online original productions, we launched Ultimate Mission and Never a Safe QiDong with upcoming titles such as Heroes of War Cable, Replacement, Wiguo, Wings of Dread, WeiQi, Wanmi, Weiqi, and others. Additionally, we have enriched our lineup by bringing licensed theatrical movies to our platform as the second window, such as Mega Heat Neutra two and highly anticipated upcoming titles like Amalice, She's Got No Name, Jiangyuanong, and Li Qingro, Chang Li Zhi.

Notably, Ne Zhi too has extended its success from to the online domain, becoming the first movie to exceed our popularity index score of 10,000 on our platform. For variety shows, we are committed to delivering top-tier content, enhancing the value of our multiple-season IPs. In the summer season, our eagerly awaited show, The Drag of China 2025, and the team of Santa Comedy Season two made a strong return. In addition, our new observation-related show, Her Prime, Zhejiang Jia, resonated positively with audiences entering the fourth quarter.

We are thrilled to bring forth new seasons of our acclaimed IP, such as the Blooming Journey Season two, Yoruba Park, and High Young Summer Season, along with the company of 18 new IP from Get Together. For animations, we are committed to elevating our original projects. Key original animations launched during summer include Over the Divine Realms, Shengbo Zishan, Embers, Yujin, Xingzhou, Demons Accession, Mo Yinji. Our highly acclaimed original production Love Between Fairy and Devil, Challenge, has returned with a second season in July and received positive feedback.

For children's content, we are dedicated to turning beloved IP into a fully immersive ecosystem, delivering experiences that grow with families and offer something special for every stage of the parent-child journey. For the second half of the year, we will launch a number of key original productions, including a new season of our classical IP Girl Squad Season four and a brand new IP, Carmen and Birds for the track. Moving on to membership services, we are focused on building a membership experience that connects with our broad audience, powered by a vibrant content ecosystem and the best-in-class services. By constantly enhancing the ads and variety of what we offer, we are delivering even more value to our members.

One notable highlight is our family-oriented ice diamond plan, which integrates an Express package that grants early access to show finals as part of its exclusive privilege. This approach has proven to be a key catalyst in driving new subscriptions and upgrades to the premium channel. In Q4, 78% of new Star Diamond subscription revenues come from upgrades. Additionally, our ad-supported basic membership plan provided an attractive option for price-sensitive viewers to further enhance the member experience. We have launched over 10 bundled membership plans to foster a stronger connection within the member community and support revenue growth. Looking ahead, we are focused on expanding these bundled membership initiatives to reach even more audiences.

We also made meaningful strides in improving perceived membership value. A highlight of the quarter is our country's experience programs. This program enables content lovers, brand advertisers, and more to get virtual seats, essentially granting membership access for binge-watching content. This feature has driven higher engagement and amplified the popularity of key titles on our platform. So far in 2025, seed purchases have already tripled the total from 2024, with show lovers accounting for the majority. Beyond that, we made membership even more rewarding this quarter by allowing members to gift the express package to friends and launching a dedicated channel for members to redeem points for projects.

On top of that, we hosted 12 VIP-only events, including fun meetups, advanced screenings, and live variety show recordings. Moving on to the advertising business. In the second quarter, brand ads benefited from enhanced premium variety shows offering and seasonality. Our flagship content continued to be highly attractive to advertisers during the first half of the year. Our premium market shows led the industry in both the total and average number of advertisers attracted in Q2. Other revenue from key advertisers delivered double-digit growth annually and sequentially. Notably, several key industries are showing positive recovery trends, with food and beverage and communication services achieving double-digit annual and sequential growth in Q2.

Looking ahead, we will sharpen our focus on maximizing ad sales from premium variety shows, dramas, and our drama sales rep brands. We see exciting potential in multiple-season variety shows. For example, ad revenue from the King of Thunder, our comedy season two, doubled compared to its first season. Additionally, we are capitalizing on new budgets for micro and short dramas, micro shows, and customized programs. Early sales of micro shows are encouraging, opening new marketing opportunities. We have also introduced product placements within micro dramas and are preparing to launch dedicated ad products for our micro drama shelter. Additionally, we are boosting monetization on smart TVs and expanding ad inventory with innovative formats.

For performance ads, strengthening relationships with existing clients while capturing budgets from high-growth sectors is our focus. In Internet services, we expanded our advertiser base by bringing in new partners for e-commerce. We utilized programmatic advertising to maximize opportunities during the June 18 shopping festival. In the education sector, we expanded our advertiser base to include wellness management services and other industries, driving year-over-year doubling in revenue. Moving forward, we will harness AI to optimize both advertising materials and placement strategies, unlocking even greater budget opportunities. In fact, AI-powered video ads saw a 20% increase in click-through rates compared to those created without AI.

Moving on to technology and products, we are committed to harnessing AI to transform entertainment experiences, amplifying content value, and enhancing user engagement. In the second quarter, we introduced the industry's first AI-powered iJump Talkout feature, redefining viewer engagement with long-form video by offering faster-paced micro drama-like experiences. With a simple swipe up or down on a mobile phone, users can effortlessly skip between key plots without missing any captivating moments. This feature is now available for over 2,300 dramas and variety shows on our main iQIYI mobile app and has quickly become a popular feature for binge-watching and rewatching favorite shows, clearly boosting user engagement.

Another pioneering example is Touhou World, launched in early 2024 as an industry-first AI agent-based NPC data platform, realizing our vision of AI-powered human-machine interaction. Featuring over 102,000 NPC agents from our most popular content, it engaged fans 24/7 in new and exciting ways. As I know, it's total an AI agent acting as a personal assistant offering support like video search, recommendation, and cloud insights. These innovations are transforming fan engagement and creating new value for our content. Beyond that, we harness AI to upgrade content production. A good example is our application of AI to streamline digital asset production.

On the set of The Great Nobody two, Dao Wanbei Huang Zhao, AI boosted the efficiency of digital asset generation by over 10 fold, cutting costs and shortening production time. For the pre-production for romance dramas, we achieved a breakthrough in qualitative script analysis, now supporting in-depth evaluation of the leading characters, dramatic relationships, and interactions. In addition to that, AI also helps in identifying unneeded plans. Moving on to our business performance in reaching outside of Mainland China. Overseas business continues its strong growth momentum with membership revenue and membership scale expanding for eight consecutive quarters.

In Q2, membership revenue grew by around 35% annually, driven by standout performances in markets like Brazil, Mexico, Indonesia, and the five Spanish-speaking regions, all reporting annual growth over 80%. Average daily subscribers reached an all-time high during the quarter. The outstanding performance is anchored in our exceptional content lineup, especially as C-drama popularity continues to grow globally. The original C-drama Field topped popularity charts in 15 overseas markets on premiere day. The winner Nimis doubled version of our dream, missing our dream set a new record for the highest daily revenue in its language segment on release day.

Corona's Diary achieved the highest popularity ranking in 13 overseas markets and led Google Trends in five markets within its first week, expanding its domestic success internationally. On top of the long-form video, we have been expanding our offering by introducing micro dramas overseas since March and have gained strong momentum. Membership revenue attributed to micro dramas surged month by month during the second quarter. By June, micro dramas ranked as the second largest category attracting new subscriptions in Indonesia, Korea, and Brazil. Our original micro drama In Is Capable Squelching Love gathered widespread international acclaim, expanding the reach and influence of our micro dramas beyond the domestic market.

Building on the initial success, we plan to ramp up original micro drama production overseas in the second half of the year. Expanding beyond content, we continue to amplify the global influence of C-pop through offline marketing events such as fan meetings and media conferences that spotlight Chinese celebrities. In the second quarter alone, we hosted three events that drew widespread engagement from users, media partners, and advertisers. Looking ahead, we are gearing up to scale these events internationally, further driving the reach of Chinese content globally. In summary, we are committed to building a beloved national brand and strengthening our market leadership with exceptional user experiences and a wide brand company ecosystem.

At the same time, we are focusing on innovation and investing in key growth areas such as AI applications, micro dramas, experience business, and global expansion, all with the goal of driving sustainable long-term success.

Jun Wang: Thanks, Mr. Gong, and hello, everyone. Let me walk you through the key numbers for the second quarter. In the second quarter, the total revenues were RMB6.6 billion. The membership services revenue reached RMB4.1 billion, down 9% annually, primarily due to our lighter content slate compared to the same period last year. The online advertising revenue was $300 million, decreased by 13% annually. During the quarter, some advertisers adjusted their advertising and promotion strategies in response to macro pressures. The accounts and distribution revenue reached RMB436.6 million, down 37% annually, primarily due to the decrease in other transactions. Other revenues increased by 6% annually to RMB829.3 million. Moving on to costs and expenses.

We have maintained a disciplined cost and expense management. The accounting cost was RMB3.8 billion, representing a saving of 8% annually, primarily due to a lighter accounted slate in the quarter. And the total operating expenses were RMB1.4 billion, representing a saving of 3% annually. Turning to profits and cash flows. The non-GAAP operating income was RMB58.7 million. The non-GAAP operating income margin was 1%. As of the end of the second quarter, we had cash, cash equivalents, restricted cash, short-term investments, and long-term restricted cash included in prepayment and other assets, totaling RMB5.1 billion. In addition, the company had a loan of US$522.5 million to PAG recorded under amount due from rogue parties.

We continue to improve our capital structure. In the second quarter, we repurchased a total principal amount of US$85 million of the 2028 notes for cash, and the outstanding principal balance remaining for the 2028 notes is $208 million as of the end of the second quarter. As we continue to optimize our debt structure, our net interest expense decreased by 33% compared to the same period last year. For detailed financial data, please refer to our press release on our IR website. Now we will open the floor for Q&A.

Operator: Thank you. Your first question comes from Maggie Yeh with CLSA.

Maggie Yeh: Regarding the recent change of policy in China's long-form video industry, could management share with us your thoughts on the potential impact to the company? Thank you.

Operator: I'll invite our Chief Content Officer, Xiaobui Wang, to take this question. The introduction of the new policies represents a significant positive development for the overall long-form video industry, which we and the entire industry welcome and fully support. These policies bring benefits across multiple aspects. First, the time cycle from content production and review to broadcast can be effectively shortened, allowing content to reach audiences more quickly. This not only improves scheduling stability but also ensures that the content aligns more closely with current social sentiment and resonates with the audience. Additionally, it also enhances the efficiency of the company's capital utilization. Second, these policies enhance the flexibility of content creation, providing creators with greater creative freedom.

This, in turn, can significantly boost the content appeal and promote greater content diversity. Third, the policies could strengthen the synergy between online video platforms and traditional TV networks. More content can benefit from simultaneous online and linear TV broadcasting, expanding distribution channels for quality production, stabilizing content distribution prices, and enhancing the reach and influence of content. This is beneficial for both online video platforms and traditional broadcasters. Last but not least, after the release of these new policies, it is sending a strong signal, and that signal can attract more talent and capital into the content production, driving the healthy and vigorous development of the entire industry. Thank you.

Operator: Your next question comes from Zhiking Zhang with CICC.

Zhiking Zhang: Thanks, management, for taking my question. You mentioned a great number of hit dramas and variety shows during the summer seasons in your prepared remarks. We have also noticed that recently, Austin Stone has achieved the ICT popularity index of over 10% and received excellent reviews. Could the management provide an overview of the content performance this summer? Additionally, considering the impact of the new regulations, what's your future content strategy? Thank you.

Operator: The CEO is taking the first part of the question. He is commenting on the new policies. After the release of the policies, I think from the company standpoint, we will promote innovation in different aspects of content production. For example, seasoned multi-season content and also different formats of innovative dramas can be produced in the future. And then next, we'll invite our Chief Content Officer, Xiaobui Wang, to take the rest. During this year's summer season from June to August, we delivered outstanding performances across drama, variety shows, film, and micro dramas. Three of our original drama blockbusters, namely Field, Coroner's Diary, and Describing Lines, all achieved ITE popularity index scores of over 10,000.

For micro drama, How Dare You hit a new milestone for ITE Popularity Index score. And for variety shows, returning flagship titles such as The King of Stand Up Comedy Season two and The Wrap of China 2025 led the market. Last but not least, on the film front, the theatrical release, The Shadow's Edge recently surpassed RMB300 million in box office revenue, and the third-party market forecast predicted total box office revenues to exceed RMB1 billion. All of these once again demonstrate the audience's strong affection for premium content that further demonstrated our strength in producing popular tier content.

In the future, benefiting from the new policies for the industry, we aim to strengthen our content strategies across different categories. For the long-form dramas, we will continue to focus on premium productions with high commercial value. And like CEO Lu Gong mentioned earlier, not only will we focus on innovations for long-form video dramas, but we will also improve our innovations for short dramas as well. For long-form video dramas, we will leverage our five major drama theaters to comprehensively cover key content genres such as suspense, romance, realistic, and comedy. For the production side, we'll focus on creating innovative contemporary storylines with tighter pacing and greater viewer appeal.

In terms of content promotion, we'll place a stronger emphasis on creativity, buzzworthiness, and emotional resonance, adopting strategies that better engage younger audiences. For micro drama, our approach for premium quality production is expected to attract more users who previously did not watch micro dramas to the content genre. We'll continue to apply our long-form drama development expertise, expand collaborations with top creators, and produce more flagship titles while exploring serialized formats. On the monetization side, beyond our existing membership and free models, we will actively explore opportunities such as content distribution, branded content integration, and IT merchandising development. Beyond dramas, we're also striving for breakthroughs across different other categories.

For variety shows, our focus remains on the flagship multi-season IPs, while continuing to explore innovative content formats. For films, we're working on a comprehensive framework to strengthen our original film projects through our three strategic initiatives, namely blockbuster project, Sleeper hit project, and an immersion film project. These efforts will expand our market share in online video online movie streaming, enhancing our influence in theatrical releases, and strengthen synergies between IT's online and offline platforms. For animation and children's content, we will continue to improve our original production capabilities, focusing on high-quality domestic animations while enhancing the monetization of children's content. Thank you.

Operator: Your next question comes from Jijie Zhu with

Jijie Zhu: I will translate the question myself. This year, we have seen that iQIYI is preparing for the offline theme park, at the same time selling related iQIYI products during the broadcasting of some top key dramas. Could you share about these strategies in the future? And how do you think of this market size? Thank you.

Operator: Our CEO, Lu Gong, is taking this question. So for IT's experience business, we have two key areas: IP-based consumer products and offline experiences. For IT consumer products, in the past, we fully operated in IT licensing, but the percentage of GMV is relatively low in the whole market. So starting this year, we're now transitioning to a self-operation, building a consumer product system that includes planning and design, manufacturing, and sales. Right now, we're starting to test the waters starting from the collectible cards. And then also we're testing the waters for different sales channels. So we will expand that effort in the future. For the offline experiences, overall, we take an asset-light approach to this strategy.

It mainly has two parts: the immersive theaters, which now is a licensed model that we operate with different stores, now has over 30 cities, have more than 50 stores. For IT land, we also take the asset-light approach and we support in terms of content management and technology. In addition to the games and experiences based on our IPs, we also have the derivative products, the IT consumer goods that we'll be selling in the stores. Collectively, it will create synergy for our overall experience business. Right now, we have the Yangzhou and Otto, Taifeng locations are in development. By the end of this year, we will probably have more locations to be announced. Thank you.

Operator: Your next question comes from Thomas Chong with Jefferies.

Thomas Chong: Good evening, management. My question is about our debt management plan. Can management share more color about this? Thank you.

Operator: Thanks. Our CFO, Jun Wang, is taking this question. As you probably noticed, for our debt, we have two parts: overseas U.S. Dollars and domestic RMB. As of the end of the second quarter, you will notice that the outstanding balance for the 2028 convertible notes is only $208 million. Currently, the company has sufficient cash to meet the debt obligation if the CP holders decide to provide to us. In terms of the domestic debt denominated in RMB, you probably noticed in the past few quarters, the long-term loan versus short-term loan has significantly improved. Currently, the portion is like fifty-fifty in terms of our outstanding loans as a whole.

Overall speaking, the capital structure now is pretty healthy enough to support our daily operations and also the long-term development and growth in the future. Thank you.

Operator: There are no further questions at this time. I'll now hand back to Ms. Yu for closing remarks.

Lu Gong: Thank you, everyone, for joining the call today. If you have any questions, do not hesitate to contact us. See you next quarter. Thank you. Bye-bye.

Operator: Thank you.

Jun Wang: Thank you.

Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.

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